Character Over Credit: Kiva Zip Creates New Model for Small-scale Ag Loans

Robert from City Bees in San Francisco, California is currently paying back his Kiva Zip loan of $5,000 to support his small beekeeping business Photo courtesy of: Kiva Zip

Traditional banking systems are notoriously reticent to provide start-up capital, especially to farming ventures. Tightening regulations lending, institution consolidation and less USDA capital available overall in recent in years have conspired to make the situation even more difficult.

As a result, small farm entrepreneurs across the globe are turning to non-traditional funding sources to jump-start and support their initiatives. One of these, Kiva Zip, a branch of the global lending organization Kiva, focuses on funding small business owners, including small farmers, in the U.S. and Kenya.

Seedstock recently had a chance to speak with Justin Renfro, Kiva Zip’s Manager of U.S. Business Development, about the program and their success in the U.S.

Starting in 2011, the Kiva Zip initiative began connecting entrepreneurs in the U.S. and Kenya with interest-free loans. Building off the broader non-profit model of Kiva to “connect people through lending to alleviate poverty,” Kiva Zip focuses on supporting small businesses and entrepreneurs, with an added element of trustee recommendation and referential support. In addition to the unique individual borrower and lender model of Kiva, Kiva Zip has introduced the role of “trustee,” a group of individuals who can evaluate and vouch for the character of potential borrowers.

Mike and his brother Fred were successful in raising a loan of $10,000 through Kiva Zip to build infrastructure for their small local dairy facility in Berea, Kentucky, this Summer. Image courtesy of Kiva Zip.

Renfro says this model of borrower evaluation and support stands to replace traditional financial methods of evaluation such as an individual’s credit score, cash flow, collateral, or years in business. By eliminating the barriers to funding so common to startups and relying instead on the character of borrowers and their role and level of support in their community, Renfro says that Kiva Zip is in a unique position to offer entrepreneurs and small businesses the opportunity to access capital for ventures that would have otherwise have likely fallen through the cracks.

“In our first two years, Kiva Zip supported 20 farmers in the U.S. Of those 20, they were all completely funded within an average of 10 – 15 days, with a 100 percent repayment rate on their loans” says Renfro. “We saw this and decided to double down on farmers across the U.S. Over 100 were supported already this year.”

Offering loans up to $15,000, Kiva Zip typically facilitates entrepreneurs in reaching their funding goals within 3 weeks; raising and cultivating loans from lenders around the world, says Renfro. In addition to supporting small local farmers, Kiva Zip has helped to fund a variety of innovative sustainable food initiatives, including national businesses such as the Greenhorns and the California FarmLink, as well as local farmers markets, grocery stores, and food hubs. Both the Greenhorns and the California Farmlink have gone on to become trustees for other businesses after successfully jump-starting their businesses, thus adding to and supporting the larger Kiva Zip lending community.

In the years to come, Renfro hopes that Kiva Zip will continue to connect sustainable agriculture borrowers to interest-free loans, as well as expand the program into other countries. He explains Kiva Zip’s non-profit business model as one that can help facilitate the creation of a more sustainable world.

“By elevating a new community of people to become this new banking system, our agricultural loans are helping to support sustainable local agriculture and support small businesses and entrepreneurs,” he says. “It’s definitely a model that can be scaled up.”